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High prices of goods blamed for costly dollar, supply disruptions

BUSINESS
By Graham Kajilwa | May 23rd 2022 | 4 min read
By Graham Kajilwa | May 23rd 2022
BUSINESS
Retailers have either reduced their size or increased in prices. [iStock]

Gone are the days when you would go to your local shop or supermarket with the exact amount of cash for a particular item you intend to buy.

Today, if our mothers were to send us to shops expecting a specific amount of change after buying a particular item, they would be shocked.

What cost Sh10 last month now goes for Sh13 or Sh15. Even the unexpected of items like Royco cubes or matchboxes have their prices up by a shilling or two.

Of the items, however, cooking oil holds the most volatile of prices which flip flop even within days. Beginning of the month, the average price of three litres of cooking oil was Sh1,100. A week later it was going for Sh1,469 only for it to drop again to Sh1,127.

Other items whose prices have changed include tissue paper that now averages at Sh25 per piece from as a low as Sh13 and a 500ml packet of milk that is now sh65

While some have not changed in price, traders have readjusted the sizes. A keen eye would notice that a bunch of sukuma wiki or greens that would go for Sh10 no longer has the same number of stalks.

Additionally, a Sh5 bunch of veges no longer features in the market.

Data from the Kenya National Bureau of Statistics (KNBS) Economic Survey 2022 shows retail prices have been highest in the last four years ending 2021 for most commodities.

For example, two kilograms of wheat flour in 2021 averaged Sh131.39 while in 2020 it was Sh119.37. Today this price is as high as Sh180.

The same is for a two-kilogram packet of maize flour which now averages at Sh150 but in 2021 it was as low as Sh90. A 400 gramme bread that cost Sh52 in 2021 now goes for Sh60, yet in 2018 and 2019 it averaged at Sh50.

At the beginning of the year, Sh10 would have gotten you four Royco cubes in your local shop. The same Sh10 now gets you three cutes.

The full pack of Royco (that has 40 cubes) that once retailed at Sh130 or Sh135 in some supermarkets now goes for Sh141 for those retailers who have depleted their earlier stocks.

The same story is told of juicy fruit chewing gum which retailed at Sh20 before the Covid-19 pandemic that saw prices of commodities jump. It now goes for Sh25.

Even salt and matchbox - considered giffen goods have not been spared. A matchbox that was priced at Sh3, for now, goes for Sh5. A 500g packet of salt however still goes for Sh20 or Sh18 in some large retailers but in local shops, there is an unexplained rise of Sh5 to Sh25.

The high prices have not spared street foods either. Retailers have either reduced their  size or increased in prices. You are forced to buy chapati for Sh15 and not Sh10 or beef samosa that goes for Sh40 and not Sh30.

What cost Sh10 last month now goes for Sh13 or Sh15.[iStock]

It seems the only item that is yet to be affected by the increasing prices of food is the street delicacy of ‘boiled egg spiced with kachumbari’ that still retail at Sh20.

This is considering the price of roasted maize from vendors in town has also gone up by Sh10 to Sh40.

This increase presents a puzzle on the authenticity of these prices. Are they justified or traders are simply adding a shilling or two just because everything else is expensive?

Ishamel Bett, chief executive officer of the Suppliers Association of Kenya said adjusting the price of a key driver of the economy such as fuel impacts almost the whole value chain in terms of cost, and transfers it to the consumer.

“But again, depending on every manufacturer or supplier, they have their own place where they source their raw materials,” he says.

“For those who have a direct link to what is happening like in Ukraine, also you could link to that.” Bett notes that fluidity in the foreign exchange market has caused an imbalance such that the cost that a consumer incurred last month and today differs.

The Shilling has been trading at Sh116 against the US dollar whose demand has been rising globally. “Supply chain at the moment - almost the entire chain has been disrupted in one way or another. This one will add a cost to either the importer or manufacturer or producer of some kind,” he added.

Mr Victor Otieno, an economist, opines that for countries which grow their own food, life happens to be a bit cheaper.

“If we are to look at the Kenyan scenario, are we growing our own food or are we importing. If we are importing our own food, then generally depending on the price of the dollar and other external factors, then that will have a direct bearing on the cost of living,” he said during an interview with Standard Group’s KTN.

National Treasury Cabinet Secretary Mr Ukur Yatani during the recent launch of the Economic Survey report said the cost of living has been complicated by the global sanctions on Russia - which have disrupted the flow of goods. Both countries are huge suppliers of wheat globally.

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“With the restrictions around that place, the situation might even get harder for us and or the globe,” said Yatani.

Mr Yatani said the government has subsidised fuel as a control measure.

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